Hexun Investment Advisor Cao Bing: There are three types of money to make in the stock market, each with its own characteristics.

Sinoe Securities investment advisor Cao Bing said that many retail investors lose money, and the core reason is that they buy blindly in the stock market without knowing what they are buying—like spending money to buy confusion. There are three kinds of money you can make in the stock market, and each has its own characteristics.

The first kind is making money from the past, that is, genuinely becoming a shareholder of a company in a tangible way. This is the easiest money to make, but it takes the longest time. Although it’s hard to achieve huge profits, it wins on stability, high winning rates, and is the first choice for those who want to preserve wealth.

The second kind is making money from the present. In essence, it is buying expectations of industry upturns. This is where institutions make the most money. They don’t care what happens to the company ten years from now, and they don’t care how glorious the past was either—they only focus on whether the company’s profits can grow quickly in the next quarter or over the coming year. With their strong in-depth research capabilities, institutions keep a close watch on market dynamics. When an industry’s business cycle reverses, they are always able to know first. The key thing to remember is that making industry money is easier than making single-stock money. When an industry is doing well, normally operating listed companies basically will rise. If you see a certain stock going up, first check whether its peers are also rising. If its peers haven’t risen or are even falling, it means that stock’s rise is abnormal—you should be cautious and pay attention, and never blindly follow the trend. Making money from the present has four steps; none of them can be missing: first, find the industry where fundamentals are trending upward—this is a structural opportunity, and not all stocks will rise; then confirm the trend signals—don’t bottom-fish on the left side or buy randomly just because it seems cheap; wait for right-side trend confirmation before taking action; then buy with a heavy position and hold until the middle-to-late phase of the trend to exit; finally, exit in time before the trend fades—don’t aim to sell at the absolute peak, but once the trend reversal is confirmed, you must leave decisively, never drag things out or hesitate.

The third kind is making money from the future, which carries the highest risk and is the hardest to make. People who buy this kind of money are not buying the company’s profits or assets—they are buying a vague and elusive story. Essentially, it’s imagination, emotion, and a liquidity premium, which has little to do with the company’s actual strength.

These three kinds of money correspond to three completely different ways of making money and operating strategies. Stock market investors must first figure out what kind of money they are buying and what kind of investor they are, and then arrange capital reasonably—only then can they avoid buying blindly, reduce losses, and truly earn the money that belongs to them in the stock market.

(Editor: Cui Chen HX015）

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